Blocking the U.K.’s exit from the European Union could spark the next global financial crisis, according to warnings issued by two U.K. policymakers.
Reports in Bloomberg Politics on Wednesday (Jan. 10) said Chancellor of the Exchequer Philip Hammond and Brexit Secretary David Davis issued a joint letter to the German newspaper Frankfurter Allgemeine Zeitung warning of the consequences should the EU vote to block Brexit from happening.
The ministers described the potential effects as “a catastrophe” and urged policymakers on both sides to collaborate to prevent a repeat of the 2008 global financial crisis.
“We must redouble our collective effort to ensure that we do not put that hard-earned financial stability at risk, by getting a deal that supports collaboration within the European banking sector, rather than forcing it to fragment,” the letter stated.
Hammond and Davis called for cooperation between EU and U.K. regulators to work out trade deals in the goods and financial services market, according to reports.
The publication noted that both ministers were in Germany this week to participate in talks of a Brexit deal between business groups and EU officials. The U.K. is said to be championing a better deal for its exit from the EU than the EU may want to offer.
Formal trade discussions won’t begin until March, and reports said both sides are in the midst of figuring out exactly what they will ask of each other.
Before talks get underway, global financial institutions are already exploring how Brexit will impact operations.
Last October, Bank of America CEO Brian Moynihan spoke with CNBC and noted he does not see an upside to Brexit. “Without Brexit hanging over our heads, we’d just be plugging away, working for customers,” he stated. “There’s no upside here.”
Moynihan added that Wall Street should hope for a best-case scenario that prevents a major disruption to markets or client assets.
The City of London, meanwhile, is pushing for changes to bank regulations in response to Brexit before the official exit occurs in March of 2019.